Auraria Student Lofts gets new Feb. 2 disclosure statement hearing

By Sarah Lizee

Olympia, Wash., Jan. 11 – Auraria Student Lofts’ request to move the hearing on approval of its modified disclosure statement to Feb. 2 from Jan. 19 was granted, according to an order filed Tuesday with the U.S. Bankruptcy Court for the District of Colorado.

As previously reported, the disclosure statement drew an objection from senior lender DB Auraria, LLC last month.

Since then, the debtor and lender have been in productive discussions regarding the disclosure statement and underlying plan, Auraria said.

The debtor said the additional two weeks would allow those discussions to continue.

At the company’s request, the court also pushed back the circulation deadline to Jan. 19, the filing deadline to Jan. 23 and the objection deadline to Jan. 30.

Auraria said it discussed the extension with counsel for the lender and the U.S. trustee, and neither expressed opposition.

Lender objection details

In its objection, the lender asks for clarifications and reconciliations of contradictions before voting on the plan.

First, DB Auraria asserts that there are conflicting property valuations of the debtor’s property, valued at $65 million or more in one instance and at $48.4 million based on a calculation of interest payments that would be made to the lender.

The lender also notes that the posited 5.25% interest rate is low for the current environment, as a sidenote.

The plan does not currently address what will happen if the property can be sold for less than $65 million. Should the property be sold for $65 million or more, then all of the secured creditors would be made whole. However, there is no contingency plan if the property cannot be sold for more than $65 million before August 2023.

DB Auraria also wants to see clarifying language that pre-confirmation renovations to the property will be funded out of the debtor-in-possession loan and confirming funding of $500,000 from the DIP loan before the rest is funded in March.

Moreover, the lender also sees the March funding of $1 million in jeopardy, as the DIP lender Nelson Partners is separately under a temporary restraining order requiring them to pay $14.67 million into a court registry, which Nelson has indicated that it is unable to pay.

The lender also points out a few key pieces that are missing from the disclosure statement: financial projections in a liquidation scenario, sale costs including transfer taxes and trustee fees and real estate taxes.

The San Clemente, Calif.-based company provides student housing in Denver. The company filed bankruptcy on June 9, 2022 under Chapter 11 case number 22-12059.

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